How to prepare for end-of-year costsMonday 12 October 2020 | Reading Time: 3 minutes
The end of 2020 will be here soon, so it’s the perfect time to review your finances. It’s important to make sure you are setting yourself up to make healthy financial choices for next year and the future. Here are eight end-of-year financial planning moves that can pave the way for financial success in 2021.
Review your finances
With a new year about to start, it’s time to take a look at your budget and figure out what your spending habits were in 2020 and what debts you owe, as well as to project how much money you’ll bring in for 2021. You should make adjustments to your budget based on any changes to your finances or your life, but also figure out where you might want to cut back and save more. Here are some budgeting tips.
Budget for specific goals
If you have some big purchases in mind for 2021, such as buying a new car or taking a vacation, you should start planning for them as soon as you can. If you don’t plan, you risk not having enough money and may be tempted to dip into your emergency savings fund or to charge the expenses to a credit card, which will put you in debt. Figure out how much your goal will cost and when you need the money, so you can start putting funds aside each month into a separate account dedicated to the goal.
Organize your financial records
Keeping your financial records organized is essential for taxes, but also important to show proof of legal contracts, insurance claims, residency, and tax returns. Saving and filing your financial documents also makes it easy to locate a record you might need. Here are some ways to organize.
Review of insurance policies
The end of the year is a good time to make sure you have a quality life, health, disability, and homeowner's insurance that can protect your family. Review your policies to determine if the coverage you have is sufficient if you need to make changes or possibly find another provider.
Get prepared for the holiday
The end of the year often adds quite a few expenses to your budget due to the holidays. Make sure you keep track of what you're planning to spend on gifts and make a budget so you don’t start 2021 with holiday debt.
Check your beneficiaries
It’s easy to forget to update your beneficiaries, but it’s a mistake not to revisit who stands to receive benefits from your insurance policies, wills, trusts, or estate. There are many changes in a person’s life, from marriage and divorce to having children, so your beneficiaries should often be reconsidered to ensure the names reflect current wishes and desires. If you don’t want your life insurance policy to go to your ex-spouse, for example, review your beneficiaries at least once a year to make any necessary updates.
Assess your 401k contributions
If you’re enrolled in a retirement plan through your employer, the end of the year is a good time to consider increasing your contribution. Many employers offer a match based on your contributions. This is essentially free money, so be sure to check and see what your employer policies are on your 401k so you can take advantage of potential opportunities and continue to grow your retirement fund.
Speak with a financial professional
To make sure everything is in order with your finances at the end of the year, you may want some help. Consider working with a financial advisor, who can help ensure your finances are on the right track heading into 2021. To find the right agent who fits your needs, submit your information through our find an agent page.